Why Finding the Losers Is the Way to Win
Avoiding bad stocks is easier than finding the best ones.
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I have on my desk a book by Terry Smith. It is called Investing for Growth: How to Make Money by Only Buying the Best Companies in the World. Receiving it prompted me to check on how that’s going for his company, Fundsmith. The answer is it rather depends on your time-frame.
The Fundsmith Equity Fund is up 23% over five years, down 7% over 12 months and down 3% year to date. So you made money over five years. Which is nice, except for the fact you’d have made more sitting in a global index filled with some absolutely splendid companies and some total duds (the MSCI World index is up around 60% over five years).